Correlation Between Microsoft and Atomic Minerals

Can any of the company-specific risk be diversified away by investing in both Microsoft and Atomic Minerals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Atomic Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Atomic Minerals, you can compare the effects of market volatilities on Microsoft and Atomic Minerals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Atomic Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Atomic Minerals.

Diversification Opportunities for Microsoft and Atomic Minerals

0.06

Correlation Coefficient

Microsoft  Atomic Minerals

Significant diversification

The 3 months correlation between Microsoft and Atomic is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Atomic Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atomic Minerals and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Atomic Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atomic Minerals has no effect on the direction of Microsoft i.e., Microsoft and Atomic Minerals go up and down completely randomly.

Pair Corralation between Microsoft and Atomic Minerals

Given the investment horizon of 90 days Microsoft is expected to generate 3.84 times less return on investment than Atomic Minerals. But when comparing it to its historical volatility, Microsoft is 4.68 times less risky than Atomic Minerals. It trades about 0.24 of its potential returns per unit of risk. Atomic Minerals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5.30  in Atomic Minerals on February 22, 2024 and sell it today you would earn a total of  1.40  from holding Atomic Minerals or generate 26.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Atomic Minerals

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Atomic Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atomic Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Atomic Minerals

The main advantage of trading using opposite Microsoft and Atomic Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Atomic Minerals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Atomic Minerals will offset losses from the drop in Atomic Minerals' long position.

The idea behind Microsoft and Atomic Minerals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.